Hillary Clinton's big payoff

WASHINGTON -- In an extraordinary return on a $1,000 investment, Hillary Rodham Clinton made a profit of $99,537 in less than 10 months from high-risk commodities trading in 1978 and 1979, according to documents released by the White House yesterday.

Trading in futures contracts for cattle, soybeans and hogs, Mrs. Clinton entered the commodities market three weeks before her husband, then attorney general and a shoo-in as the state's top executive, was elected governor of Arkansas.

She traded through the Springdale, Ark., office of the futures brokerage firm Refco Inc., employing a broker, Robert L. "Red" Bone, who was disciplined by regulators for trading violations both before and after he dealt with Mrs. Clinton.

One month before he invested money for Mrs. Clinton, Mr. Bone had completed a one-year ban on trading commodities for his own account, a disciplinary action resulting from allegations that he tried to manipulate the egg-futures market in 1970.

Five months after Mrs. Clinton closed her account, Mr. Bone was formally accused by regulators of "serious and repeated" trading violations, including allocating trades to the accounts of investors after he knew whether those trades had made money or lost money. Through that operation, favored customers would be guaranteed of making money at the expense of other customers.

In December 1979, Mr. Bone agreed to a three-year suspension of his registration at the Chicago Mercantile Exchange.

John Podesta, a White House aide, and Lisa Caputo, Mrs. Clinton's press secretary, said yesterday that Mrs. Clinton didn't know at the time about the violations. A former official of the Chicago Mercantile Exchange, where the trades were handled, said he was not aware of any allegation at the time that Mrs. Clinton profited from Mr. Bone's activities. Mr. Bone could not be reached yesterday for comment.

James B. Blair, general counsel of Tyson Foods, Inc., the Arkansas agribusiness giant, has said that he advised Mrs. Clinton on her commodities trades. Mrs. Clinton "put up her own money, invested it in her own accounts and assumed the full risk of loss," according to a two-page White House statement released along with the trading summaries.

The documents, released amid questions about the family's finances sparked by the Whitewater controversy, show that Mrs. Clinton initially invested $1,000 in cash in October 1978 in the high-risk commodities market, turning a profit -- literally overnight -- of $5,300.

On a single day in February 1979, she made a profit of $25,280, more than her entire salary for the previous year at the Rose Law Firm.

John Damgard, president of the Futures Industry Association, called Mrs. Clinton's profits "quite extraordinary. First-time, inexperienced investors in futures are not apt to turn $1,000 into $100,000 very often."

Experts said that Mrs. Clinton's windfall, while unusual, was not unheard-of in the commodities market.

"The thing about commodities is you've got to be able and willing to lose as much as you make," said Michael Veatch, a retired Chicago Mercantile Exchange trader. "And she was trading like somebody who could afford to lose $100,000."

Mr. Veatch, who examined copies of Mrs. Clinton's account, said: "This is not the way a novice trades. This account was very aggressively traded from the beginning."

One expert said that brokerage houses would ordinarily require an investor who wanted to put $1,000 in the commodities market to have a net worth of at least $50,000, which the Clintons did not have at that time. But brokerage houses had discretion to extend credit to anyone they wanted, according to John Troelstrup, who was then vice president for compliance at the Chicago Mercantile Exchange.

Commodities futures are traded on "margin," in which investors put up only 5 percent or 10 percent of the actual value of a contract. A contract is a commitment to buy or sell a commodity, such as cattle or soybeans, on a particular date in the future. If there is a loss, the investor is required to make up the difference.

In her first three months of trading, Mrs. Clinton reaped $26,541 and took $19,000 of that amount in cash before the end of 1978.

Starting in 1979 with a balance of $7,541, she made an additional profit of $72,996 by July, when she closed the account.

A White House aide who briefed reporters on condition that he not be identified said Mrs. Clinton quit, even though she was making money, because "she got pregnant [and] it was too nerve-racking."

But three months after closing her Refco account, Mrs. Clinton opened a second commodities trading account with Stephens Inc., a Little Rock brokerage house. The White House did not release any documents related to that account yesterday. Mrs. Clinton lost a total of $1,009 in the second account and closed it shortly after her daughter, Chelsea, was born.

With both Clintons earning relatively modest salaries at the time, the money helped finance the couple's home and investments in securities and real estate, possibly including their payments of loans for the Whitewater Development Corp., and also a nest egg for their daughter.